Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $29. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet a. Calculate the exercise value of the firm's warrants if the common sells at each of the following prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) Do not round intermediate calculations. Round your answers to the nearest dollar. (1) (2) (3) $20 25 30 b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 100 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 11%. Assume that each warrant will have a market value of $2.75 when the stock sells at $20. What coupon interest rate and dollar coupon must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.) Do not round intermediate calculations. Round your answer for coupon interest rate to two decimal places. Round your answer for dollar coupon to the nearest dollar. Coupon interest rate: Dollar coupon: $ Check My Work 1 Warrants 3 4 Exercise price Current stock price $29 $20 6 7 8 9 10 Annual Coupon Bond Issue with Warrants Length of maturity (in years) Par value Number of warrants attached to one bond Yield on annual bonds with no warrants Market value of each warrant 20 $1,000 100 11% $2.75 Calculation of Exercise Value of Warrants at Different Stock Prices: Exercise Price Exercise Value Stock Price $20 $25 $30 $100 Formulas #N/A #N/A #N/A #N/A Formulas Calculate dollar coupon payment and interest rate on bond with warrants to clear the market: Value of the bond, Ve Coupon interest rate on bond Dollar coupon payment on bond HNIA #N/A #N/A Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $29. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet a. Calculate the exercise value of the firm's warrants if the common sells at each of the following prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant's exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.) Do not round intermediate calculations. Round your answers to the nearest dollar. (1) (2) (3) $20 25 30 b. Assume the firm's stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 100 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm's straight bonds yield 11%. Assume that each warrant will have a market value of $2.75 when the stock sells at $20. What coupon interest rate and dollar coupon must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.) Do not round intermediate calculations. Round your answer for coupon interest rate to two decimal places. Round your answer for dollar coupon to the nearest dollar. Coupon interest rate: Dollar coupon: $ Check My Work 1 Warrants 3 4 Exercise price Current stock price $29 $20 6 7 8 9 10 Annual Coupon Bond Issue with Warrants Length of maturity (in years) Par value Number of warrants attached to one bond Yield on annual bonds with no warrants Market value of each warrant 20 $1,000 100 11% $2.75 Calculation of Exercise Value of Warrants at Different Stock Prices: Exercise Price Exercise Value Stock Price $20 $25 $30 $100 Formulas #N/A #N/A #N/A #N/A Formulas Calculate dollar coupon payment and interest rate on bond with warrants to clear the market: Value of the bond, Ve Coupon interest rate on bond Dollar coupon payment on bond HNIA #N/A #N/A
